Loans

The following table shows the Company’s loan portfolio by category as of the dates shown:



	March 31,			December 31,			March 31,
(Dollars in thousands)	2016			2015			2015
Balance:
Commercial	$	4,890,246		$	4,713,909		$	4,211,932
Commercial real estate	5,737,959			5,529,289			4,710,486
Home equity	774,342			784,675			709,283
Residential real estate	626,043			607,451			495,925
Premium finance receivables—commercial	2,320,987			2,374,921			2,319,623
Premium finance receivables—life insurance	2,976,934			2,961,496			2,375,654
Consumer and other	119,902			146,376			130,156
Total loans, net of unearned income, excluding covered loans	$	17,446,413		$	17,118,117		$	14,953,059
Covered loans	138,848			148,673			209,694
Total loans	$	17,585,261		$	17,266,790		$	15,162,753
Mix:
Commercial	28		%	27		%	28		%
Commercial real estate	32			32			31
Home equity	4			5			5
Residential real estate	4			3			3
Premium finance receivables—commercial	13			14			15
Premium finance receivables—life insurance	17			17			16
Consumer and other	1			1			1
Total loans, net of unearned income, excluding covered loans	99		%	99		%	99		%
Covered loans	1			1			1
Total loans	100		%	100		%	100		%

The Company’s loan portfolio is generally comprised of loans to consumers and small to medium-sized businesses located within the geographic market areas that the banks serve. The premium finance receivables portfolios are made to customers throughout the United States and Canada. The Company strives to maintain a loan portfolio that is diverse in terms of loan type, industry, borrower and geographic concentrations. Such diversification reduces the exposure to economic downturns that may occur in different segments of the economy or in different industries.

Certain premium finance receivables are recorded net of unearned income. The unearned income portions of such premium finance receivables were $56.9 million at March 31, 2016, $56.7 million at December 31, 2015 and $48.1 million at March 31, 2015, respectively. Certain life insurance premium finance receivables attributable to the life insurance premium finance loan acquisition in 2009 as well as PCI loans are recorded net of credit discounts. See “Acquired Loan Information at Acquisition” below.

Total loans, excluding PCI loans, include net deferred loan fees and costs and fair value purchase accounting adjustments totaling $(8.9) million at March 31, 2016, $(9.2) million at December 31, 2015 and $(3.7) million at March 31, 2015. The net credit balance at these dates, is primarily the result of purchase accounting adjustments related to acquisitions in 2016 and 2015.

It is the policy of the Company to review each prospective credit in order to determine the appropriateness and, when required, the adequacy of security or collateral necessary to obtain when making a loan. The type of collateral, when required, will vary from liquid assets to real estate. The Company seeks to ensure access to collateral, in the event of default, through adherence to state lending laws and the Company’s credit monitoring procedures.

Acquired Loan Information at Acquisition—PCI Loans

As part of our previous acquisitions, we acquired loans for which there was evidence of credit quality deterioration since origination (PCI loans) and we determined that it was probable that the Company would be unable to collect all contractually required principal and interest payments. The following table presents the unpaid principal balance and carrying value for these acquired loans:



	March 31, 2016				December 31, 2015
	Unpaid Principal		Carrying		Unpaid Principal		Carrying
(Dollars in thousands)	Balance		Value		Balance		Value
Bank acquisitions	$	331,354	$	276,012	$	326,470	$	271,260
Life insurance premium finance loans acquisition	299,915		296,138		372,738		368,292

The following table provides estimated details as of the date of acquisition on loans acquired in 2016 with evidence of credit quality deterioration since origination:



(Dollars in thousands)	Foundations
Contractually required payments including interest	$	19,350
Less: Nonaccretable difference	3,640
Cash flows expected to be collected ⁽¹⁾	$	15,710
Less: Accretable yield	1,141
Fair value of PCI loans acquired	$	14,569

(1) Represents undiscounted expected principal and interest cash at acquisition.

See Note 7—Allowance for Loan Losses, Allowance for Losses on Lending-Related Commitments and Impaired Loans for further discussion regarding the allowance for loan losses associated with PCI loans at March 31, 2016.

Accretable Yield Activity - PCI Loans

Changes in expected cash flows may vary from period to period as the Company periodically updates its cash flow model assumptions for PCI loans. The factors that most significantly affect the estimates of gross cash flows expected to be collected, and accordingly the accretable yield, include changes in the benchmark interest rate indices for variable-rate products and changes in prepayment assumptions and loss estimates. The following table provides activity for the accretable yield of PCI loans:



	Three Months Ended
(Dollars in thousands)	March 31, 2016			March 31, 2015
Accretable yield, beginning balance	$	63,902		$	79,102
Acquisitions	1,141			898
Accretable yield amortized to interest income	(5,457		)	(6,105		)
Accretable yield amortized to indemnification asset ⁽¹⁾	(2,171		)	(3,576		)
Reclassification from non-accretable difference ⁽²⁾	4,193			1,103
Decreases in interest cash flows due to payments and changes in interest rates	(2,390		)	(1,224		)
Accretable yield, ending balance ⁽³⁾	$	59,218		$	70,198


(1)	Represents the portion of the current period accreted yield, resulting from lower expected losses, applied to reduce the loss share indemnification asset.


(2)	Reclassification is the result of subsequent increases in expected principal cash flows.


(3)	As of March 31, 2016, the Company estimates that the remaining accretable yield balance to be amortized to the indemnification asset for the bank acquisitions is $4.8 million. The remainder of the accretable yield related to bank acquisitions is expected to be amortized to interest income.

Accretion to interest income accounted for under ASC 310-30 totaled $5.5 million and $6.1 million in the first quarter of 2016 and 2015, respectively. These amounts include accretion from both covered and non-covered loans, and are both included within interest and fees on loans in the Consolidated Statements of Income.